Carl Icahn Is Suing Michael Dell For Trying To Thwart His Attempt To Take Over Dell

Carl Icahn is suing Dell Computer CEO Michael Dell and his group
for attempting to thwart Icahn's takeover of the embattled PC
maker,
Reuters reports.

Icahn is trying to block Dell from setting a new record date
ahead tomorrow's shareholder vote for control of the company.

In his lawsuit, he also included a list of demands , said
Reuters, one being that CEO Michael Dell and his group not be
able to vote any shares issued after February 5th, the day the
deal was announced.

Last week, the Dell shareholder vote was postponed at Michael
Dell's request. He offered to raise his bid for the company by
ten cents if shareholders would change the rule that counted
absentee votes as "no" (to his buyout offer) votes. Shareholders
refused.

After that drama, Icahn published an open letter to Dell
shareholders yesterday, urging them to help him put this battle
to death.

New York, New York, July 29, 2013 – Carl C. Icahn and his
affiliates today issued the following open letter to stockholders
of Dell Inc.

Dear Fellow Dell Stockholders:

In their Merger Agreement, Michael Dell/Silver Lake agreed with
the Dell Board that they would purchase Dell if, and only if, a
majority of the outstanding shares held by unaffiliated
stockholders voted in favor of the transaction. In that Merger
Agreement, the Dell Board agreed with Michael Dell/Silver Lake
that none of the current stockholders would be allowed to own
shares in the newly formed company – they would be frozen out.
Further, the Dell Board agreed, wrongly in my opinion, to let
Michael Dell/Silver Lake purchase the stock at what I view is a
very undervalued price.

Even though the Dell Board and Michael Dell/Silver Lake agreed
that a majority of the outstanding stock held by unaffiliated
stockholders would be required to approve the transaction, and
even made that provision of the Merger Agreement non-waivable,
this required vote has not been achieved. Reports have indicated,
and it is clearly the case, that Michael Dell/Silver Lake did not
have sufficient stockholder support at either the July 18 or July
24 meetings.

Instead of accepting defeat with dignity, Michael Dell, in his
interview with The Wall Street Journal, complained that the
Merger Agreement he negotiated is unfair. This is the very Merger
Agreement that Michael Dell/Silver Lake agreed to, and
ironically, Michael Dell, not the stockholders, initiated this
proposed transaction. Is it Michael Dell’s alter ego who
keeps whining about the unfairness of an agreement that he
himself asked the Dell Board to accept?

I might be able to understand the actions of Michael Dell, who
does not wish to lose a golden opportunity, but I cannot
understand the actions of the Dell Board. The Dell Board approved
a merger at what I believe to be a very undervalued price but
they at least made it clear that an affirmative vote of a
majority of the outstanding unaffiliated shares would be required
to accept the Michael Dell/Silver Lake proposal, first at a
meeting on July 18, and then again, on July 24. But reports
indicate that Michael Dell/Silver Lake did not have the necessary
stockholder support to approve their proposed transaction at
either of the scheduled meetings. The stockholders have spoken.
Additionally, millions of shares of Dell stock have been traded
since the Dell Board signed the Merger Agreement which included
the non-waivable stockholder approval requirement -- a provision
that Michael Dell now wishes to change. What about the
stockholders that purchased and sold shares of Dell stock based
on this provision? Why does the Dell Board continue this
travesty? Why do they make a mockery of what little is
left of corporate democracy at Dell?

In The Wall Street Journal interview, Michael Dell criticizes the
fact that Icahn was not a stockholder when the process started.
In effect, he seems to be saying that Icahn has no right to
meddle with Michael Dell’s “super Dell” deal. I am also confused
by Michael Dell’s statement that “after one of the most thorough
processes in history the highest price that any of the parties
was willing to pay was $13.65”? But what about our proposed Dell
self tender offer, which we believe has a total value to
tendering stockholders of approximately $15.50 to $18 per share?*
I guess Michael Dell believes a bid doesn’t count if it is made
by someone who didn’t own the shares when the process began.
Michael Dell should remember that it was he, not us, who put a
value on the company, thereby placing it in auction, and Michael
Dell and the Dell Board would do well to understand that in an
auction, even a Dell auction, anyone has the right to bid.

Michael Dell spent many months crafting a merger agreement that
would not only “freeze out” all unaffiliated stockholders but
would also make it nearly insurmountable for anyone to make a
competing bid. Michael Dell is correct when he says the Merger
Agreement that he and the Dell Board agreed to is unfair. I
believe it is unfair to the stockholders because of its effect on
anyone who wishes to make a competing bid. Because of the
inclusion of matching rights in favor of Michael Dell/Silver
Lake, a competing bidder carries significant risk that their bid
would just be topped by Michael Dell/Silver Lake, in which case
they would have paid sizeable fees for financing commitments yet
be without a deal, a situation we believe is unfair. If a
competing bidder is effectively used as a stalking horse against
the Michael Dell/Silver Lake transaction, it is reasonable to
expect that the Merger Agreement should permit the company to
enter into an arrangement with the competing bidder to receive a
break-up fee to cover its financing expenses. I guess Michael
Dell and his army of advisors did not count on anyone being
willing to put up $3 billion of their own money in order to put
forth an alternative proposal to Dell’s offer -- but miracles do
happen.

Conclusion Concerning The Wall Street Journal Interview

Where Michael Dell Shows His True Colors

Throughout the interview Michael Dell makes statements such as
“my focus throughout has been to our company’s customers and
partners.” He states again “my focus first and foremost has been
on the company and our employees, customers and partners”. Except
in the context of having his deal pushed across the finish line,
Michael Dell barely mentions the company’s stockholders. I guess
he loses focus when the stockholders come into view. Michael Dell
states that “we could do what we needed to do better and faster
as a private company.” He has, therefore, for the good of the
company, determined he must deny all stockholders the right to
participate in the possible good fortunes of Dell in the future.
The interview neglected to ask, or possibly Michael Dell refused
to answer: “Did you ever once offer, or did the “independent
committee” ever ask you to offer, your stockholders a contingent
value right or warrant so that they might also be able to
participate in the good fortune that might result from you taking
Dell private?”

Why I Am Involved

Our system of corporate governance in this country is
dysfunctional. In my opinion, boards are empowered to do
ridiculous and even inconceivable things to take advantage of
stockholders. I have railed against this fact for years. But no
one would believe, and with good reason, that I would risk $3
billion because I am outraged at the treatment of stockholders at
Dell. While I am enraged, the major reason I am involved is that
I believe the Michael Dell/Silver Lake transaction undervalues
the company. I have spent many hours discussing Dell with
experts, and there are many reasons to believe Michael
Dell/Silver Lake’s proposal materially undervalues the company.
Perhaps the most important reason is Dell has a major liability
that can be easily removed and that I believe would make the
company a great deal of value. It is the CEO, Michael Dell. If
Dell can replace Michael Dell, I think that the company would be
worth far, far more. I do not say this facetiously. I fully
expect to be able to identify a first class person to run Dell if
our slate of directors are elected at the annual meeting. Icahn
has a history of bringing in strong new CEO’s that have gotten
good results (for example, consider our activities in Biogen and
Motorola, to name a few) and Icahn and Southeastern are beginning
to see success in replacing top management at Chesapeake Energy.
Bringing in a new CEO, unhampered by Michael Dell and the old
regime, is in my opinion, both effective and necessary when
attempting to turn a company around. It has often been my
experience that removal of an underperforming CEO will allow a
company to become more productive, more competitive and more
profitable and has helped create billions in stockholder value
for the companies that I have been involved with. If my
past record is any indication, I believe you will be happier and
richer if you join me in voting against the Michael Dell/Silver
Lake deal. Finally, I can't help but note that Michael Dell has
fared much better selling over 62 million shares in the $32 to
$40 range over different periods in the past 10 years.
Unfortunately for stockholders, he seems to be a much better
market-timer than a CEO. It is time for Michael Dell and the Dell
Board to go.